Adani Group to Make Historic $1 Billion Investment in Sri Lankan Wind Projects, Boosting Energy Security and Renewable Energy

New Delhi: The Adani Group plans to invest more than USD 1 billion in wind power projects in Sri Lanka. This will be the largest foreign direct investment and the biggest power project in Sri Lanka’s history, according to sources.

Adani Green Energy Ltd (AGEL), a part of the Adani Group, will build two wind farms in Mannar town and Pooneryn village in northern Sri Lanka. These wind farms will have a total capacity of 484 megawatts and will cost around USD 740 million. An additional USD 290 million will be spent on infrastructure to transmit the electricity to where it is needed, the sources said.

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These wind projects will not only be Sri Lanka’s largest renewable energy initiative but also the country’s biggest power project so far.

Strategic Importance

Last month, Sri Lanka agreed to buy electricity from Adani’s wind farms for 20 years. According to the agreement, AGEL will be paid 8.26 cents per kilowatt-hour (kWh), which is cheaper than the rates for other thermal and wind projects in the country. For comparison, thermal projects cost up to 26.99 cents per kWh, and other wind projects range from 9.67 to 13.99 cents per kWh.

The Adani Group is also working on a USD 700 million terminal project at Colombo, the island’s largest port. Sri Lanka, which faced severe power blackouts and fuel shortages during its economic crisis in 2022, has introduced new laws to improve its power sector and attract renewable energy investments. This move aligns with commitments made under a USD 2.9 billion aid package from the International Monetary Fund (IMF). The aim is to reduce losses in the state-run Ceylon Electricity Board (CEB) and make the sector more appealing to investors.

Adani’s project is also strategically important for India, as it limits China’s economic influence in the Indian Ocean, especially in northern Sri Lanka, which is close to India.

Approval and Future Benefits

Sources mentioned that government-level talks between India and Sri Lanka have taken place, and many other Indian firms are planning to invest in Sri Lanka. There are also discussions about setting up a power transmission line between Sri Lanka and India for energy trade.

Adani’s project has received approval from the Sri Lankan cabinet, and a power purchase agreement is being finalized. Once completed, Adani will start the project, which is expected to be finished in two years.

Despite the competitive tariff of 8.25 cents per unit, lower than existing energy tariffs, an anti-India lobby allegedly backed by China and fossil fuel suppliers is opposing the project. They are raising concerns about the environment, procedural fairness, and tariffs.

However, the project has passed an Environment Impact Assessment (EIA) conducted by an independent expert, and Adani has followed all laws. Sri Lanka’s Electricity Act allows proposals under a government-to-government mechanism, which applies to Adani’s project. The project was awarded through a formal process involving a request for proposal (RFP) and evaluation by the CEB’s Project Committee, followed by tariff negotiation by the Cabinet Appointed Negotiation Committee (CANC). The Public Utilities Commission of Sri Lanka (PUCSL) has also approved the project.

Adani’s tariff is lower than that of the government’s own wind power plants and fossil fuel-based power. The project will enhance Sri Lanka’s energy security, provide clean, renewable energy for about 600,000 households, create over 1,200 local jobs, reduce fossil fuel imports by USD 270 million annually, and cut CO2 emissions by 1.06 million tonnes per year.

For a country that imports fuel and is facing an economic crisis, this project will not only bring foreign investment but also reduce the fossil fuel import bill, sources said.